Saturday, 21 April 2018

NBA 2017 Regular Season Review

The NBA 2017-18 season concluded a few days ago, and for The Beast, which suggested backing Overs when the total was 215.5 or higher, the final numbers are:


The maximum return (34.96 points) was actually when backing at 216 points or higher, so being off the optimum total by half a point is pretty good, if I do say so myself.

In terms of ROI, and a minimum of 100 bets, the best return was 16.3% at the 225 points or higher level. 

The average total line increased this season as expected, although not by quite as much as I was expecting after 2016's giant leap, although worth noting that the average in the last two months (March and April) climbed to 214.6:
I'm sure I'll be looking at these numbers in more detail closer to the start of next season, but the trend to more three point shots and average number of possessions doesn't show any signs of slowing down.


Backing Road Favourites also returned to profitability this season after a rare losing season with the highest number of selections ever:
Note that backing road favourites giving more than 10.5 points is not profitable, so the above results are for road favourites below that handicap.

The optimal range saw the ROI% at almost 7%.
The other (almost) perennially profitable system is backing Road Favourites coming off a loss when playing an opponent coming off a win. While not quite reaching the heights of 2013, an ROI of 33.75%, albeit from a small bet total of 54, was solid enough.

Monday, 9 April 2018

Sleepless In Denver

Back in January 2011, I wrote about the uniqueness of the city of Denver in US Sports:

In US sports, Denver is a unique place to go for a game, given that the altitude there is about, as Broncos fans will know, one mile, and ideally teams arrive there more than a day ahead to get acclimated. Of course, when you have a game the night before, you have no choice but to arrive late, and if Miami left LA straight after their loss, they wouldn't have arrived until the wee hours of Thursday, and losing an hour on the way.

How significant is this? Over the last 55 games that Denver has hosted an opponent playing the second game of a back-to-back, they have a 46-9 record. A little nugget of information for you (pun intended).
My suspicion is that this post will have resonated with precisely zero readers, but should anyone have been following the Denver Nuggets in home games this season playing against teams on a back-to-back, they would have been rewarded with a 100% straight up winning record, and a 6-2 record against the spread. 

ESPN touched on the topic of NBA scheduling in this recent article. Surprisingly Denver isn't the toughest place to go this season on short rest when playing a rested opponent. Minnesota Timberwolves boast a 9-0 record in such games. Other impressive records this season (80%+) include the Houston Rockets 6-0, Philadelphia Seventysixers 9-1, Toronto Raptors and Boston Celtics both 7-1, Miami Heat and Oklahoma City Thunder 6-1, Detroit Pistons 11-2, San Antonio Spurs 4-1 and Dallas Mavericks 2-0. ATS, these are a combined 50-30-3. Why the Mavericks have just two such games while the Pistons have 13 seems to be something of a scheduling issue.

The two 100% teams in this scenario from last season were the Golden State Warriors 15-0 and the Los Angeles Clippers at 11-0, but the newly extended season and subsequent reduction in back-to-backs has seen the number of opportunities for these teams drop to 7 and 8 games respectively.

As favourable as playing a tired opponent at home might be, some teams still manage to waste the opportunity. Over the past five seasons, ATS at home, the Sacramento Kings are 9-30 while the Orlando Magic are 12-30-1. On the road, the biggest flops are (again) the Orlando Magic joined at 3-8 by the Denver Nuggets who clearly find it easier to win these games at home, followed by the Boston Celtics at 5-12. 

Tuesday, 3 April 2018

MLB April Shorties


The table above shows the results of backing short priced (1.5 or shorter) MLB favourites during the opening month of the season. The returns are calculated using the American method of betting to win 100 units.

Over the last five full seasons, this simple strategy is up 96.53 points from 1,082 bets, an impressive ROI of 8.92%. Last season was the best, +55.70 points from 296 selections, 18.81% ROI.

Some months this strategy is best left alone - the opening and closing months of March and October are both small sample sizes, but losing ones, as is the All-Star month of July, where form appears to be disrupted by the annual break.  

Resurrection

Well, March was an interesting month. The blog celebrated its tenth anniversary while its creator decided to ignore abdominal pains for 12 days resulting in emergency surgery and a few days in hospital and, in the consultant's words, "dodging a bullet". After six decades of almost perfect health, to be close to checking out was a bit of a shock, and an opportunity to reassess priorities.

It's been over a month since my last post, which is a record by some margin, but the daily hit count averaged around 300 during my absence which wasn't bad. The last post on the topic of the types of gamblers and why they gamble received one comment from Jamie, who wrote:
Couldn't agree more with the comment about expert gamblers not getting excited about big wins. That of course would also be the case towards losses and not getting emotional towards them also.
The emotional side towards money is a big difference between novice and expert gamblers and a trait that is very underestimated.
A video that provoked thoughts for me towards money was a clip from trader Anton Kreil. "Respect money but at the same time be indifferent towards it" Worth a watch. Especially around the 10 min mark where he starts to put money on the table.
https://www.youtube.com/watch?v=VTbiFqqlN_g
Worth a watch, although having read reviews of Anton's Forex trading videos priced at close to $3,000, I wouldn't recommend going down that path. 

For me, the big difference between novice and expert gamblers is the expectations each has. The expert understands the problems with scaling, and that it is a long-term activity with ROIs generally in the low single digits. The novice unrealistically thinks in terms of doubling their bank every few weeks. 

The expert is patient, looking for market weaknesses and not caring if he has a bet or not for a few days, while the novice thinks there's value to be found daily in popular football markets, finding patterns where none exist. While confidence is a good thing, it needs to be based on reality. The reality is that when you are betting, you are competing against people far more experienced and knowledgeable than yourself, and it's delusional to think that betting or trading successfully is something that anyone can do.

You require a very particular set of skills. Skills acquired over a very long career.

My betting activities were curtailed somewhat during March, which might not have been a bad thing. The Beast had a losing month, although still profitable for the season to date:
The regular season ends on Wednesday 11th April, but as one door closes, another opens with the 2018 MLB season now underway. The T-Bone System is off to a good start, with four straight winners and two more selections today - the Los Angeles Dodgers and the Chicago Cubs. Here are the results from the last ten seasons:
 

Friday, 2 March 2018

Major Losses

A rare visit to the Betfair Forum led me to a YouTube video featuring a TEDx talk from a former problem gambler. After leaving the Army, the speaker somehow managed to lose £750,000, as well as his wife. 


One slide from the presentation looked familiar, but I can't for the life of me place why:
It wasn't the happiest of talks, (possibly the most upsetting part was that five million people buy the Daily Mail each day), although the ex-Major seems to have got his act together, at least for now, but is a good illustration of how vulnerable some people are to self-destructive behaviours.

Somewhat related was another YouTube talk I found today on the topic of Risk Intelligence, which included this slide:
The speaker, Dylan Evans, explains how for problem and leisure gamblers, betting isn't about making a profit, it's about the thrill of the win. 

For expert gamblers, there is no thrill, it's work. It's something I've written about previously - if you get excited about a big win, you should probably quit betting. 

Evans describes the motivation of the expert gambler as "the cold, rational pursuit of profit, with a certain degree of intellectual satisfaction", something else that I have long suggested, for example these words from a 2010 post on Why We Gamble:
I do find trading and investing a challenge, but an intellectual challenge rather than anything resembling a “war”.
He also talks about how expert gamblers don't see betting in terms of the maximum amount they might win but in terms of expected value, and that by thinking in this way, bets are considered with a longer time horizon.

He ends with a Damon Runyon quote: 
The race is not always to the swift, nor the battle to the strong, but that is the way to bet.  

Thursday, 1 March 2018

The Rule of 40%

There was an embarrassing error in the Wall Street Journal’s article on pundits and the strategy of the 40% probability claim. 

The full article is below, but first see if you can spot the error in this section:

Citigroup’s Mr. Suva forgot to hedge. He put a 40% chance on Apple buying Netflix, but also a 25% chance Apple buys Walt Disney Co. , a 10% chance each it buys one of three videogame makers, and a 5% chance it buys Tesla Inc. That sums to 100%, implying it is mathematically certain Apple buys one of them.
How Do Pundits Never Get It Wrong? Call a 40% Chance

Talking heads have learned that forecast covers all outcomes; ‘I just said it was a strong possibility.’

What are the chances that readers will make it to the end of this article? About 40%.

If you do make it, that prediction will look smart. If you don’t, well, we said the odds were against it.

Such is the nature of the 40% rule, a favorite forecasting tactic of Wall Street analysts and other prognosticators trying to make a bold call without being too bold.

Former British Prime Minister Tony Blair said last month there’s a 40% chance that Brexit will be reversed; Citigroup Inc. analyst Jim Suva wrote that there’s a 40% chance Apple Inc. buys Netflix Inc.; and Nomura Holdings Inc. economist Lewis Alexander said there’s a 40% chance Nafta gets ripped up.

The nice thing about 40% is that you never have to say you were wrong, says Peter Tchir, a market strategist at Academy Securities. Say you predict the Dow Jones Industrial Average has a 40% chance of hitting 30000 before year-end.

“Get it right and you can say ‘See, I was telling everyone it could happen,’ ” he says. “Get it wrong and you can weasel your way out: ‘I didn’t say it was likely, I just said it was a strong possibility.’ ”

With a 24-hour news cycle, outlets from cable channels to newspapers are always looking for an expert to weigh in. If they offer an audacious estimate that will get clicks, all the better. The trend has boosted the industry of analysts and talking heads who predict everything from election outcomes to corporate earnings.

A whiff can ding a forecaster’s reputation.

Nate Silver became America’s most famous election forecaster when he called all 50 states correctly in the 2012 presidential election. Four years later he was criticized for repeatedly projecting that Donald Trump stood no chance in the Republican primary and for his final pre-vote projection that gave Hillary Clinton a 71% chance of victory.

Mr. Silver says he deserves some criticism for his primary projections, but not his general election forecast, which he called “highly informative and useful” since others gave Mr. Trump a smaller chance.

To protect their reputations, pundits hedge. They may not provide a date by which a forecast will occur. They often “cluster” forecasts together with other analysts around a “consensus” figure so that everyone will probably be the same amount of wrong.

Citigroup’s Mr. Suva forgot to hedge. He put a 40% chance on Apple buying Netflix, but also a 25% chance Apple buys Walt Disney Co. , a 10% chance each it buys one of three videogame makers, and a 5% chance it buys Tesla Inc. That sums to 100%, implying it is mathematically certain Apple buys one of them.

A Citigroup spokeswoman said Mr. Suva doesn’t believe a deal for one of those companies is guaranteed. She said the forecast was really a conditional probability, contingent on Apple using its huge cash pile for what she called a “mega deal,” which she said Mr. Suva actually views as less likely than a large stock buyback. The conditional probability wasn’t specified in Mr. Suva’s research note.

“Pundits and gurus master the art of going out on a limb without going out on limb,” says Philip Tetlock, a professor at the University of Pennsylvania who has made a career analyzing which people forecast well, and why. One of his pet peeves is how gurus use vague terms like “distinct possibility” instead of percentage odds when they describe probabilities. That makes it easy to wiggle out of, or take credit for a forecast, since it isn’t clear at all what a distinct possibility is.

But one drawback of percentage odds, Mr. Tetlock says, is that people are often unclear on what they actually mean.

Mr. Silver can relate. Some of his harshest critics took his 71% projection of a Clinton victory as a sure thing that she would win, he says. “You wouldn’t cross the street if there was a 30% chance you’d get hit.”

Courageous contrarian calls are the best way forecasters capture the public’s attention, and get television time. New York University Professor Nouriel Roubini was dubbed “ Dr. Doom ” for correctly predicting the financial crisis. Then in 2010 he projected a 40% chance of a “double-dip recession” in the U.S. It didn’t happen.

Mr. Roubini says he doesn’t remember the projection, but that he takes pride in sticking his neck out, as with his latest call that Bitcoin is the biggest bubble in history and will go to zero.

“I would not rule out that I’ve committed the sin of the 40% rule,” said Prof. Roubini. “Everybody has done so.”

“There’s an aspect of infotainment” that Wall Street forecasters always keep in mind, says John Kilduff, portfolio manager at commodities hedge fund Again Capital. In September 2015 Mr. Kilduff told CNBC viewers that crude oil had a 40% shot at falling to $20 per barrel. Then at $45, oil followed its downward trend before bottoming at $30.

“You’re always riding the hero-shithead roller coaster,” says Mr. Kilduff, “we all have plenty of haters, and they’re even more visible now with Twitter . ” He noted one correspondent who took a forecast personally. “Hope you lose EVERYTHING [on] your short,” the person wrote in a salty email reviewed by the Journal. The correspondent also called Mr. Kilduff ugly.

“The old 40% trick!” recalled Stephen Roach, formerly Morgan Stanley’s chief economist. “A warning of a looming forecast change, a rising risk assessment, a way to cover your rear—or a combination of all three.” Mr. Roach said that by stamping a 40% probability on a possible outlier he could call clients’ attention to shifting winds without changing his underlying forecast.

A nonrigorous examination of Mr. Roach’s past forecasts showed he put a 40% chance on two recession predictions in 2002 and 2004, and then another recession projection in 2010. All of those he got wrong, or rather, got right, since he said the odds were against.

The 40% rule can be useful for all manner of punditry. British boxer Anthony Joshua speculated in 2015 that underdog Tyson Fury had a 40% shot to beat heavily favored champ Wladimir Klitschko. Mr. Fury won, and now wants to fight Mr. Joshua. A spokesman for Mr. Joshua didn’t respond when asked what chance the boxer would give himself against Mr. Fury.

By the way, if you made it this far, we always predicted you might.


There was also another nonsense click-bait headline and article from the Yahoo!Finance pages this week.
The MarketWatch headline read:

Steve Wozniak had $70,000 in bitcoin stolen after falling for a simple, yet perfect, scam

Well, not exactly. At the time the Apple co-founder tried to sell his 7 Bitcoins, they were worth about $700 each, so the writer is being somewhat disingenuous in claiming that the loss was $70,000 when it was actually less than $5,000.

Then there’s a Mashable article on the same topic with the false headline:

Even Steve Wozniak said he fell victim to a bitcoin scam
No, he didn’t fall victim to a bitcoin scam. He fell victim to an old fashioned credit card scam, and that the object stolen happened to be bitcoins is irrelevant.

As for the probability error in this post's lede, anyone who has a basic understanding about probability will know that the probabilities of independent events do not sum as the authors suggest.

Using their numbers, I make it a 31.16% chance that Apple buys none of the companies listed, not 0% as the writer suggests.

I’m not suggesting that any bet listed in the example here would be the best value ever, but should Crystal Palace be quoted at 2/1 next season to win the Premier League, 2/1 for the FA Cup and 2/1 the League Cup, the probability that they will win one of the competitions is not 100%.

Someone miserably failed Basic Probability 101.

Tuesday, 27 February 2018

The Unimaginative Fool

A year ago, I wrote about Warren Buffett's annual letter to shareholders of Berkshire Hathaway, and as tends to be the case with annual events, the 2018 edition is now available, though at 17 pages, a lot shorter than his usual missive. 

As usual, the letter is full not only of common sense, but also of amusing lines.

On acquisitions, he writes:

Why the purchasing frenzy? In part, it’s because the CEO job self-selects for “can-do” types. If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.
On the Berkshire 5K run this coming May, he writes: 
Entrants in the race will find themselves running alongside many of Berkshire’s managers, directors and associates. (Charlie and I, however, will sleep in; even with Brooks running shoes, our times would be embarrassing.) 
On retail 'savings':
Remember, the more you buy, the more you save (or so my daughter tells me when we visit the store).
As his daughter is 64, I'm not convinced this is a true story.

On dining:
Show you are a sophisticated diner by ordering the T-bone with hash browns.
On the magic of compound interest and the benefits of a buy and hold strategy, Buffett writes, after showing a chart of short-term price declines in the last 53 years:
This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions
As I mentioned last year, there are always parallels with sports investing, and that last sentence certainly applies to sports investing. 

Buffett continues:
In the next 53 years our shares (and others) will experience declines resembling those in the table. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow. When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That’s the time to heed these lines from Kipling’s If:
“If you can keep your head when all about you are losing theirs
If you can wait and not be tired by waiting
If you can think – and not make thoughts your aim
If you can trust yourself when all men doubt you
Yours is the Earth and everything that’s in it.”
Other words of wisdom that stood out to me:
In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.
On risk:
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained. 
On self-delusion, and also with relevance to sports investing and those promises of riches beyond your wildest dreams: 
As well-known analyst V.J. Dowling has pointed out, the loss reserves of an insurer are similar to a self-graded exam. Ignorance, wishful thinking or, occasionally, downright fraud can deliver inaccurate figures about an insurer’s financial condition for a very long time. 
Finally, most readers will be aware of the ten year $500,000 bet Warren Buffett made in 2007 that passively investing in the S&P 500 would beat any portfolio of at least five actively managed funds. As the years ticked by, the result was never in doubt, with 2008 the only year where the S&P 500 was beaten. 
The bet illuminated another important investment lesson: Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.
One very recent example is that after the markets entered correction territory a little over two weeks ago, the three main indexes I track are all back within 3.5% of their all-time highs, and in profit on the year, while the Brexit handicapped FTSE languishes a little further back, and negative in 2018, for those who didn't take my advice to follow US indices.
In more traditional financial markets, once again the main US benchmark index outperformed the UK's FTSE100. Only 4 times in the last 24 years has the FTSE prevailed, and the disaster that is Brexit means the US and Overseas markets are where most of my investments will again be in 2018.
Back to 'the bet' and Warren Buffett summarises:
Let me emphasize that there was nothing aberrational about stock-market behavior over the ten-year stretch. If a poll of investment “experts” had been asked late in 2007 for a forecast of long-term common-stock returns, their guesses would have likely averaged close to the 8.5% actually delivered by the S&P 500. Making money in that environment should have been easy. Indeed, Wall Street “helpers” earned staggering sums. While this group prospered, however, many of their investors experienced a lost decade.
Performance comes, performance goes. Fees never falter. 
In case you've missed earlier posts on the subject, of which there are several, invest in low-cost index funds and stay the course. 

Friday, 16 February 2018

NBA Systems Half-Time Report

With the NBA idle this weekend for their All-Star weekend, it's a good time to look at how the current season is playing out. 

Some of you will recall that back in September, I made a case for backing the Overs on games where the total was set at 215.5 or higher, a system I named The Beast. How many of you took action on this I don't know, but you missed out if you didn't.

I predicted a very manageable average of around two bets a day, and the 264 selections to date is very close to that number, and the results so far are very good:

The higher totals are even more profitable, for example 219.5 and higher has a similar P and L but from just 57% of the bets:
Although the BLUnders system lost money last season for the first time since 2010, I've been excluding the high total games (over 215) resulting in just 25 selections so far this season, and only one in the entire month of January, but the 9.3% ROI so far is a good reward for patience.